29 January 2014

Chairperson: Ms D Nhlengethwa (ANC)

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Meeting Summary

The first submission was by De Swardt Vögel Myambo, a group of Attorneys, Conveyancers and Notaries. The presenter said that the Local Government: Municipal Property Rates Act, Act 6 of 2004 determined the valuation criteria for property and specified that the general basis of valuation was the market value of a property, being the amount that the property would have realized if sold on the date of valuation in the open market by a willing seller to a willing buyer. Section 46 specifically clarified that in determining the market value of a property, the valuer must consider; the value of any license, the value of any immovable improvement on the property that was being used for a purpose inconsistent with the permitted use of the property, the value of the use of property for a purpose which was in contravention of the permitted use of the property. The proposed Amendment Bill [B33-2013] intended to introduce the definition of mining property and to amend section 17, dealing with impermissible rates to include the prohibition on a municipality to levy a rate on mining rights or a mining permit within the meaning of the Mineral and Petroleum Resources Development Act, Act 28 of 2002.

The relevant sections in the Amendment Bill were Section 10(c) which proposed the amendment of section 17 of the MPRA by substituting subsection 1(f). The word “mineral” would be substituted with “mining” or “mining right” and Section 19 which proposed the amendment of subsection 2(a).

The presenter said that the amendments if accepted as it was would be unconstitutional, would cause unfair discrimination between the valuation of mining properties and other commercial properties and would be extremely prejudicial to the Local Governments. He said that the Committee should not accept the proposed amendments in Section 10(c) and section 19 of the Amendment Bill and that Municipal Property Rates Act should be amended by deleting subparagraph (f) of Section 17(1).

He attached exhibits “FT1” to “FT8” and “H24” exchanged in the Valuation Appeal Board hearing relating to certain financial data of the relevant mines to his submission to corroborate his arguments.

Responding to questions, he said that the right given to the mines was a limited real right because it was linked directly to a particular property. He added that since there was a zoning influence on ratings and a valuer would not ignore the fact that a hotel is a hotel or a Casino has a gambling licence, and it formed the criteria for the valuation, why then the mining property be exempted. Why would a mine be exempted and a commercial centre should not? Should the valuer ignore the nature of that property as a mining property when valuing the property?

The valuer from the South African Institute of Valuers as against the initial impression created by the presenter said that the mines did pay taxes. He said that Property Rate Tax had nothing to do with the financial statements or records of the mines. The valuer is not interested in the financial books of the company.

The Director of Valuations, City of Johannesburg said that if the mines itself was ignored while the valuer was making his valuations, as the Amendment Bill stated then the property would be underrate. He was of the opinion that the Municipality must not be deprived of the income that should accrue to them to provide services for the community as a result of the ongoing mining activities.

The second submission was by a Land Economist Valuer. He reminded the Committee that the National Economic Policy was to create jobs not prohibit it. Several questions were raised about land issues for the Committee members to reflect on. His proposed amendments were to Section 16 of Act 6 were:
The rate must be limited to an amount in the Rand specified in the notice “save that the minimum amount in the Rand for unused, unimproved land becomes whatever is needed to capture 100% of the unearned market land rent as rates”.

“No rates can be levied on improvements because firstly they result in job loses but they also unfairly subsidize land values, favouring landowners over the landless”.

His proposed amendment to Section 46, Act 6 of 2004 was: Therefore it is a useless and fruitless expenditure to value improvements and Section 46 of Act 6 of 2004 should be changed to: Subject to any other applicable provisions of this Act, the market value of a property is the amount the property would have realised if sold on the date of the valuation in the open market by a willing seller to a willing buyer, “excluding any improvements, and other amendments to expunge the valuations and rating of improvements within Act 6 of 2004”.

The third submission was from the office of Mr Pierre-Jeanne Gerber. He said that a Municipality values the properties in his jurisdiction by the Municipal Valuer who should be a Professional Valuer because a lack of experience may cause a valuation mistake and could be very costly and may end up in court cases. A property owner had the right to make objections against the valuation amount if it was incorrect. He also had a right to appeal to the Valuation Appeal Board if his objection was denied. The Valuation Appeal Board acted as a valuation court which heard and decided appeals against the decisions of Municipal Valuer. Clause 25 therefore would change the composition of the Valuation Appeal Board and allow the MEC to appoint a Professional Associated Valuer instead of a Professional Valuer.

The South African Council for the Property Valuers Profession (SACPVP) made a special concession to allow Professional Associated Valuers to register as Professional Valuers subject to certain conditions. This special concession would increase the number of professional valuers and would surely assist in the availability of Professional Valuers to appoint to Valuation Appeal Boards.

He proposed that Clause 25 was unnecessary as it had been addressed by the SACPVP
Special concession and would be detrimental to the ratepayers of South Africa.

The fourth submission was by the Sustainable Tourism Partnership Programme. Sustainable Tourism Partnership Programme (STPP) was established to facilitate the implementation of Sustainable Tourism Practices in Smaller Accommodation Establishments (SAEs) and Tourism SMMEs across South Africa. The aim of the programme was to contribute to the objectives of National Tourism Sector Strategy as well as the National Development Plan Vision 2030. The programme was closely aligned to the recommendations from the United Nations Environmental Programme.

Smaller Accommodation Establishments come into being as a result of: Children leaving home, retirement, difficult economic climates, and demand.

There were many regulations, by-laws and licences required for the running of a Smaller Accommodation Establishment. Municipalities see Smaller Accommodation Establishments as “low hanging fruits”. They request the properties to rezone and they charge commercial rates as well as additional charges for electricity, water and sewerage. In 2012/2013 over 300 Guest Houses closed down due to the increasing costs and decreasing occupancy due to the world economic climate.

A survey by STPP among small tourism businesses focused on the needs of Smaller Accommodation Establishments regarding rates, zoning and service charges displayed an interesting spread with no consistency. Establishments sizes were zoned differently depending on the municipality but what was clear was that some smaller establishments were business zoned which should not have been required. Other concerns raised by STPP were reflected in the submission.

Sustainable Tourism Partnership Programme would appreciate if a more uniform rate or benchmark in charging rates on Smaller Accommodation Establishments was established by the Municipalities.

Meeting report

De Swardt Vögel Myambo Attorneys and Conveyancers submission
Dr A De Swardt said that the Local Government: Municipal Property Rates Act (No 6 of 2004) determined the valuation criteria for property and specified that the general basis of valuation was the market value of a property. This being the amount that the property would have realized if sold on the date of valuation in the open market by a willing seller to a willing buyer. Section 46 specifically clarified that in determining the market value of a property, the valuer must consider; the value of any license, the value of any immovable improvement on the property that was being used for a purpose inconsistent with the permitted use of the property, the value of the use of property for a purpose which was in contravention of the permitted use of the property. The proposed Amendment Bill [B33-2013] intended to introduce the definition of mining property and to amend section 17, dealing with impermissible rates to include the prohibition on a municipality to levy a rate on mining rights or a mining permit within the meaning of the Mineral and Petroleum Resources Development Act (MPRDA), No 28 of 2002.

He said that presently in terms of the Municipal Property Rates Act, a mining property should be valued on the basis of its market value. Section 46 of the Municipal Property Rates Act states that the valuer attending to the valuation of the property must consider the value of any licence, permission or other privileges granted in terms of legislation. An example of such is a casino with a gambling right or a shopping centre. Although these licences and rights were not generally individually valued as a separate value forming attribute, they were informative and indicative of the highest and best use of the property and as such do play a role in the value of the relevant property.

Section 17(1)(f) of the Municipal Property Rates Act stated that a municipality may not levy a rate on mineral rights. Mineral rights in the form as it existed prior to the implementation of the Mineral and Petroleum Resources Development did not exist in South Africa anymore and did not affect the determination of the mining value of a mining property. It is therefore currently possible to determine the market value of a mining property and to rate it accordingly.

He gave the relevant sections relating to his submission in the Amendment Bill. They were:
3.2 Section 10(c) of the Amendment Bill which proposed the amendment of section 17 of the MPRA by substituting subsection 1(f) as follows: “on “mineral” mining rights of a mining permit within the meaning of the Mineral Petroleum Resources Development Act, 2002 (Act No.28 of 2002), excluding any building, other immovable structures and infrastructure above the surface of the mining property required for the purposes of mining”. The word “mineral” would be substituted with “mining” or “a mining permit”.

3.3 Section 19 of the Amendment Bill proposed the amendment of subsection 2(a) and the substitution as follows: “The value of any licence, permission or other privilege granted in terms of legislation in relation to the property, but not a mining right or mining permit granted in terms of the Mineral and Petroleum Resources Development Act, 2002 (Act No. 28 of 2002).

In his submission, Mr De Swardt informed the Committee that the amendments provided in paragraphs 3.2 and 3.3 should not be accepted because these proposed amendments would:
- Be unconstitutional, as it would unfairly and without legal jurisdiction discriminate between different property categories.
- Unfairly prevent municipalities to recover property rates on the market value of mining properties within their jurisdiction.
- Unfairly burden municipalities to deal with the negative social and financial implications caused by mines in particular in respect of the payment of living-out allowances.

Dr A De Swardt gave a practical application on the issue at hand. He said that that the Merafong City Local Municipality in Carletonville, Gauteng attended to the valuation of some of the largest goldmines in South Africa for the purposes of their general valuation effective 1 July 2012. Sibanye Gold Mine, Anglogold Ashanti Gold mines and Harmony Kusaselethu mines were a few of the mining properties that valuations were made for. The valuations were performed on the basis of a Discounted Cash Flow (DCF) to determine the market value of each mine. The valuation formed the subject matter of a Valuation Appeal Board hearing that was currently pending. A more comprehensive report relating to the valuation appeal would be submitted to the Portfolio Committee to substantiate that the proposed amendments would be unconstitutional, extremely prejudicial to Local Governments and would unlawfully prevent municipalities to recover property rates based on the market value of mining property.

Moreover, it is apparent that the mining sector formed an extremely important part of the South African economy and was a substantial contributor to the GDP. It would therefore be imperative that the sector be supported as far as possible. This support was being given through the income tax dispensation that applied to the mining sector which enabled mines to deduct all operational expenditure and all capital expenditure before determining their taxable income. The mines were therefore in an extremely beneficial income tax position which contributes an insignificant portion of its income as income tax. It would then be unfair to further extend this benefit to the property rates which would be very prejudicial to Local Governments in general. Additionally, exhibits “FT1” to “FT8” and “H24” exchanged in the Valuation Appeal Board hearing relating to certain financial data of the relevant mines were attached to his submission to corroborate his arguments.

He concluded his argument with his submission that this Committee should not accept the proposed amendments in Section 10(c) and section 19 of the Amendment Bill and that Municipal Property Rates Act should be amended by deleting subparagraph (f) of Section 17(1).

Discussion
Mr D Mavunda (ANC) asked for a better clarification of the submission, as he wanted further examples to be given that would validate the proposals Mr De Swardt was making.

Ms Veronica Mafoko, a Senior Manager from the Department of Cooperative Governance and Traditional Affairs (DCoG), asked the presenter to juxtapose the mining rights and permits with the Gambling or a Shopping Mall permit and right which he made reference to in his submission. She reminded the Committee that the Property Rates Act dealt with properties and rights against properties and not personal rights or other issues. A mining right is not a right against the property, it is the personal right given to the person who runs the mine. That was why in this Bill, clarity had been given to differentiate between who paid the rates for the mining property especially when the owner of the property was different from the mining right holder.

In his response, Dr De Swardt said that it was correct that the mining right is given to the mining house in terms of the MPRDA but the right is a limited real right because it is linked directly to a particular property. He made a comparison between a mine and a Shopping Mall because of the zoning influence on ratings. A commercial centre would be rated far higher than a residential property in the same area. The residual effect of this amendment would then be that the valuer would ignore the nature of that property as a mining property when valuing the property. Since the valuer would not ignore the fact that a hotel is a hotel or that a shopping mall or a casino has a gambling licence, and it formed the criteria for the valuation, then why should the mining property be exempted? Since the zoning obviously had an influence on ratings, why would a mine benefit and a commercial centre should not?

Mr Mavunda called the attention of the Committee to the fact that amongst other things, the amendment to the Bill tried to harmonise the environment under which the property rights had been conducted. Utmost care must be taken so that in the long run, after all the insertions and amendments have been effected, more issues or questions would not arise from the lack of proper understanding of the Bill.

The Chairperson wanted to know whether Dr De Swardt had compared the definition of mining rights property or permit to the definition by MPRDA?

Dr De Swardt replied in the affirmative. Moreover, in the ongoing Valuation Appeal Board proceedings, the mining houses were saying that they should be exempted from paying any property rates. In Section 8 of the Act, differential rates that distinguished different categories of property were identified and it included a provision-making category for mining rights. If a valuer could not value a mining property based on the mining rights and the value it contributed to the property, then creating a category would not have any purpose. As much as it is not the intention of this submission to “milk” the mines, they should give the Local Government what it is entitled to it from property rates. It would be extremely difficult to recover property rates on mining property if the mining right was excluded. Consequently such property cannot be considered as a mining property. If a valuer values a property, he takes into account the nature of the property and in this regard, a mining property which is valued on a DCF basis, basing the valuation on the income. This is a common practice and is how other property are valued so why should a mining property be different.

Mr Mzilikazi Manyike, Executive Manger, DCoG, pointed out that as much as the arguments presented should not be discounted, a holistic picture of all the financial burdens levied on the mining property should be produced. This would assist greatly in determining whether the mining property would be under taxed by the amendment. In addition, Section 17 was a mineral right and now a proposal is presented to ”change it to a mining right or a mining permit”. Also there is the issue of the exclusion after the comma sign. There must be clarity as to what exactly the issue at hand was and the relevant Act to back it up must be given. Why was the issue of exclusions coming up now? Why had it not been raised before now since it had been there all along. He requested the indulgence of the Chairperson that with respect to Section 46(2), the other valuers at the hearings could also express their opinion on the matter so as to know whether there was a consensus.

The Chairperson replied that some of the valuers have made submissions, they could be called back. However, the current programme of the Committee must be adhered to and concluded.

Dr De Swardt enumerated a list of the taxes being paid by the mining properties. He said mines pay income tax, property tax, State royalties based on minerals extracted and they also contribute to the Social & Labour Plan payment. The State Royalty was calculated on a formula of less than 4% of the income generated by the mines. This takes into account the profitability of the mines. The Social & Labour Plan Payment (SLP) are contributions that the mines were obliged to pay in terms of agreements with the Department of Mineral & Energy. Attached is a document (H24) that gave an overview of the issues being discussed. Of note was the SLP contribution which itemized that Anglogold/Ashanti SLP projects in 2012/2013 were R32 300 000, Harmony SLP projects during the same period were R6 700 000 and Goldfields SLP projects 2012/2013 were R12 500 000. In his comments he said that these contributions were a mere joke with regards to the profit being made by the mines. For example, Goldfields made about R 7 billion during the same period of discussion. He said these SLP contributions, as good as they look, they do not substantially put money back in the community. In retrospect, since the Gold law was established in 1908, the mines had always been given the benefit of Income Tax breaks and Property Rates Tax exemptions. In 1994, the exemption of paying low property rates was removed. When the Property Rates Act was established, the mineral rights were terminated, therefore for the Department to reintroduce Mineral Rights in Section 17, would be going back.

The Chairperson conclusively said that deliberations would be made on the submissions. She appreciated the submission.

An opportunity was given to Mr Andre Zybrands, from the South African Institute of Valuers, to comment on the submission.

Mr Zybrands was of the opinion that the emotional submission given by Dr de Swardt was not factual enough. Dr de Swardt created the impression that the mines did not pay taxes until he (the presenter) had to respond to the question on the number of taxes paid by the mining property. Mr Zybrands said that Property Rate Tax had nothing to do with the financial statements or records of the mines. Furthermore, he pointed out that Dr Swardt mentioned in his submission that if the proposed amendment went through, then the mining category on the Section 8(2) should be scrapped. In his opinion that was hogwash because there were exclusions in the proposed amendment which the presenter did not take note of. Section 17(1)(f) stated that: “on “mineral” mining rights of a mining permit within the meaning of the Mineral Petroleum Resources Development Act, excluding any building, other immovable structures and infrastructure above the surface of the mining property required for the purposes of mining”. Based on this section, it is impermissible to value the mining permit but the buildings and infrastructure; office building, roads and improvements above the ground must be valued. In his opinion the Department was correct in their amendment. Section 17 and 46 say specifically that the mining permit must be excluded and if this was not, then the minerals in the ground would be valued, which contradicted what must be valued.

The Chairperson wanted some clarification on exclusions.

Mr Zybrands explained that if the minerals in the mines must be valued, then a Chartered Accountant would have to be consulted because as valuers they value the buildings and infrastructure erected by the mines. For example, if he wanted to value a property, he would ask the Landlord how much the tenants are paying for the floor space and he would rate his valuing on that information and on any other infrastructure erected by the business owner. The valuer is not interested in the financial books of the company.

Mr T Bonhomme (ANC) expressed his happiness with how Mr Zybrands had cleared up the concerns he had.

Mr Boinamo (DA) added that he was aware of the impact that the mines in the rural areas were having, aside from paying royalties. He said they employed quite a large number of people thereby reducing unemployment in the country. They build clinics, schools and roads for the community in which they were carrying out their mining activities. These services rendered in the communities must be take cognisance of and they must not be overtaxed.

Mr Zybrands agreed with Mr Boinamo.

Mr Christopher Gavor, Director of Valuations, City of Cape Town, suggested that an opportunity be given to Mr Piet Eloff, Director of Valuations, City of Johannesburg to make his comments.

Mr Piet Eloff was of the opinion that as good as the arguments presented by Mr Zybrands was, if the mine itself was ignored while the valuer was making his valuation, as the Amendment Bill states then the property had been underrated. It may be true that the mines were erecting some infrastructure; however, many times this infrastructure was for themselves and their workers. The rates they pay was also very little. If the activity carried on, is ignored, then what value would be left. Not much. There must be a contribution that the mines must make to the Municipalities in which they are situated. Since gambling activities cannot be ignored while valuing a Casino, then the Municipality must not be deprived of the income that should accrue to them to provide services for the community as a result of the ongoing mining activities.

The Chairperson expressed her pleasure at the exercise being conducted as it gave such clarity on the mining issue. She wanted to know who would be charged to pay rates on the land if the farmer cultivating the land was the landowner but a part of the land was being used for mining purposes.

Mrs Veronica Mafoko replied that due to these kind of issues, the amendment to the bill now had introduced that on the land that had two activities being carried out, the owner of the mining right would pay the rates on his own part of the land in which mining activities are being carried out and the farmer would pay the rates of his own side of the land where agricultural activities were being carried out.

Mr Gavor cautioned that in these deliberations, utmost care must be taken so that the core principles of valuation were not tampered with. He added that some of the amendments being introduced to the bill were as a result of issues experienced during valuation processes. Valuing property is guided by legislature which states that if the rental paid on a property is not market related, then the valuer can use a comparable market rental to determine the value of the property. A valuer can thus use the comparable market rentals to determine the value of the properties of the mining property. The National body feels that the mining property is almost becoming a personal right and not a property as such and the valuation should be property based and not personal based.

Mr Peter Meakin Comments – Proposed Amendment of Section 16 of Act 6 of 2004
Mr Peter Meakin, a Land Economist Valuer presented his proposed amendment. He reminded the Committee that the National Economic Policy was to create jobs not prohibit it. He posed several questions for the Committee members to reflect on. Some of them were:
• Do rates and tax policies limit job creation?
• If people were penalised for building by having to pay rates and taxes on the bricks and
mortar as well as the land, then would not less building occur than otherwise?
• To the extent that the city relies on building values and not land values for its rates revenue, the
price of land will rise. This makes it more difficult for builders to buy land and so do not high land prices impede development, with a further loss of jobs?
• That land values rely largely on nature, location, infrastructure, State, Provincial and City services. Therefore, land values are an unearned State subsidy?
• That a mansion built for R2m on a R500k plot pays five times more rates than a vacant stand
next to it when they both enjoy the same benefits of location, services and infrastructure?
• That it is illegal for landowners not to use land or keep it vacant. There is no zoning scheme in
South Africa or around the world that did not demand that land be used to grow, rear, or build?
• That the accuracy of valuing improvements were untested because proper audits of accuracy
where independent valuers do manual valuations in the field were not carried out?

His proposed amendments to Section 16 of Act 6 were:
• The rate must be limited to an amount in the Rand specified in the notice “save that the minimum amount in the Rand for unused, unimproved land becomes whatever is needed to capture 100% of the unearned market land rent as rates”.
• “No rates can be levied on improvements because firstly this results in job loses but they also unfairly subsidize land values, favouring landowners over the landless”.
Therefore it is a useless and fruitless expenditure to value improvements and Section 46 of Act 6 of 2004 should be changed to: Subject to any other applicable provisions of this Act, the market value of a property is the amount the property would have realised if sold on the date of the valuation in the open market by a willing seller to a willing buyer, “excluding any improvements, and other amendments to expunge the valuations and rating of improvements within Act 6 of 2004”.

Discussion
The Chairperson noted that there must be a way of legislating some of the salient issues raised by the presenter in relation to proper valuing so as forestall loopholes created by wrong valuation.

Mr Mavunda in his comments said that the land issues raised by the presenter were prevailing issues that were seen on daily basis but not taken care of. He said that the implementation of such issues were crucial.

Ms Veronica Mafoko said that the submission was about the basis for which is the market value of land and building and not really about the Amendment Bill. He was merely questioning the basis for evaluation which was a completely bigger issue. However, she would appreciate if he could restate his proposal on the amendment on Section 16.

Mr Meakin restated his proposal saying that “save that the minimum amount in the Rand for unused, unimproved land becomes whatever is needed to capture 100% of the unearned market land rent as rates” should be added to - The rate must be limited to an amount in the Rand specified in the notice. He was of the opinion that no rates should be levied on improvements because they resulted in job losses and therefore unconstitutional. He said that another question that arose was whether Section 46 was constitutional or not as it contradicts Section 16.

Mr Mzilikazi Manyike also commented that there was nothing new about the land issues raised by the submission because they were issues had been previously raised between 2003 and 2004 which he himself(presenter) participated in. However, since 2005 that the Act commenced, there had been no constitutional issues arising about the Act. He added that the questions that the presenter was bringing up should be tabled with the South African Institute of Valuers (SAIV), a voluntary professional association or with the South African Council for Property Valuers(SACPV) .

Pierre-Jeanne Gerber submission
Mr Pierre-Jeanne Gerber, former ANC MP 1994 – 2009, informed the Committee of his previous involvement in the Municipal Property Rates Act No. 6 of 2004 when it was still in Bill format. He had pointed out the omission in the then Bill to the then Chairperson of the Portfolio Committee which processed the Bill, Yunus Carrim. After his interaction with the Committee and the officials, clause 24(2)b was created. Now as a member of the public, he would want to point out a problem with the Bill at hand that in his opinion should be corrected.

There are three categories in the Valuation Profession namely, a) Candidate Valuer (a student valuer) b) Professional Associated Valuer (a person not yet qualified to register as a valuer c) A Professional Valuer. When a Municipality values the properties in his jurisdiction, it was done by the Municipal Valuer who should be a professional valuer. The Municipality must make sure that the valuer is experienced as any valuation mistake could be very costly and may end up in court cases.

When a property valuation is presented to a property owner by the Municipality, the individual has a right to make objections to the valuation amount if it was incorrect. He should tender reasons for the objection. If the valuer rejects the objection and sticks to his valuation of the objector's property, the objector then has the right to appeal to the Valuation Appeal Board. The Valuation Appeal Board acts as a Valuation Court which hears and decides appeals against the decisions of Municipal Valuer. The Board is appointed by the relevant MEC and consists of a chairperson who must be a person with legal qualifications and sufficient experience in the administration of justice and up to four members of which at least one must be a professional valuer.

With regards to the Bill, Clause 25 would change the composition of the Valuation Appeal Board and allow the MEC to appoint a Professional Associated Valuer instead of a Professional Valuer as one of the other four members of the Board. He added that the motivation for this Clause was probably because there was a shortage of Valuers in South Africa especially at the time of drafting the Bill. However, the South African Council for the Property Valuers Profession (SACPVP) made a special concession to allow Professional Associated Valuers to register as Professional Valuers subject to certain conditions. This special concession would increase the number of professional valuers and would surely assist in the availability of Professional Valuers to appoint to Valuation Appeal Boards.

It is very important that there should be at least one Professional Valuer on the Board because the Municipal Valuer who in most cases is a Professional Valuer might be intimidating to the Professional Associated Valuer on the Board. The property owner must also be assured that his interest would be handled by a highly qualified and experience Valuation Appeal Board.

He therefore proposed that Clause 25 was unnecessary as it had been addressed by the SACPVP special concession and would be detrimental to the ratepayers of South Africa.

Discussion
Few comments arose as a result of the submission.
An MP wanted a further explanation of what Clause 25 was about. He suggested that the explanation given by the presenter should be backed up with a scenario so as to further clarification of the Clause 25 of the amendment Bill.

Another MP said that it was true that SACPV has made concessions to register more valuers. He said however that that to get a Professional Valuer in places like Cape Town may be easy, but difficult to get in places like Mpumalanga. In his opinion, he felt that the clause could be retained and not deleted. He said that overtime the section would become redundant when there was a hike in registered Professional Valuers.

An MP chipped in that at times, a valuer might not have evaluated the property of an individual or member of the public to the person’s satisfaction. He may request that reasons be given him and the valuer could say he was not obliged to offer reasons and the property owner may be forced to go court. However, it is obvious that not every South African had the financial capacity to go the court

Mr Pierre-Jeanne Gerber responded that the property was valued by the municipality and if it was too high, reasons could be sought for by the property owner. He gave an example where an individual was charged R300 so as to have access to reasons justifying the valuation. This action is so unfair. In his conclusion, he reiterated that he believed that the clause should be deleted because efforts to reverse the clause 10years from now would be much more complicated than imagined.

The Chairperson wanted a clarification of the 3 categories in the Valuation Profession namely, a) Candidate Valuer (a student valuer) b) Professional Associated Valuer (a person not yet qualified to register as a valuer c) A Professional Valuer.

Mr Zybrands replied that the Candidate Valuer was a student undergoing training to be a valuer while the Professional Associated Valuer was lower than Professional Valuer in that the examinations they were obliged to write were different and the years of experience were also different. He added that he agreed solely with the proposal of Mr Gerber since opportunity had been given to Professional Associated Valuer to become Professional Valuer if they meet the requirements and were good enough as valuers. This would aid the growth and the stability of the industry.

Sustainable Tourism Partnership Programme comments
Ms Caroline Ungersbock, Co-Founder of the Sustainable Tourism Partnership Programme, said that the Sustainable Tourism Partnership Programme (STPP) was established to facilitate the implementation of Sustainable Tourism Practices in Smaller Accommodation Establishments (SAEs) and Tourism SMMEs across South Africa. The aim of the programme was to contribute to the objectives of National Tourism Sector Strategy as well as the National Development Plan Vision 2030. The programme was closely aligned to the recommendations from the United Nations Environmental Programme.

She defined Smaller Accommodation Establishments as establishments that offered paid accommodation with less than 15 rooms. The estimated number of Smaller Accommodation Establishments were 30, 000 with an average number of 5 rooms. It was estimated that the number of direct jobs that ensued as a result of this was 1 per room and 5-7 indirect jobs. According to the World Tourism Organisation (UNWTO), 1 billion tourists travelled in 2012 and this contributed 1 job for every 12 tourists. Smaller Accommodation Establishments come into being as a result of: Children leaving home, retirement, difficult economic climates, and demand.

There were many regulations, by-laws and licences that were required for the running of a Smaller Accommodation Establishment, many of which have cost implications. These costs differ from municipality to municipality. She said that Municipalities see Smaller Accommodation Establishments as “low hanging fruits”. They request the properties to rezone and they charge commercial rates as well as additional charges for electricity, water and sewerage. In 2012/2013 over 300 Guest Houses closed down due to the increasing costs and decreasing occupancy due to the world economic climate.

She drew the Committee's attention to a four-tiered scenario which existed in Mossel Bay. This scenario was in relation to the occupation of 4 identical properties next to each other with the following accommodation; 4 bedrooms with en-suite bathrooms, the usual reception rooms, 1 guest toilet, a granny cottage and 1 toilet. She compared a Residential Home with a family of 5 with grandparents living in granny flat and contributing to expenses as against a Rental Home with the owners living elsewhere, renting the house to a family of 5 & granny flat to 2 persons, a Guest House with the owners living in granny flat, using the Guest House as a short term rental and then with the Self Catering, the owners living in the house and using granny flat for self catering for guests. She said that The Municipality rated the residential and rental homes as Residential but charged rates on the Guest House and the Self Catering (see the submission for details).
All the above properties receive an income and could therefore be termed as business. All the above properties are however residential by Nature and should be treated as such. This was in line with Art 3.3 of the Municipal Property Rates Act: Act 6 of 2004 which states that “the rates policy must treat persons liable for rates equitably”. The only difference between a Rented House and a Guesthouse or a Self Catering property was the length of stay of the occupants. For services, Art 74.2a states that “users of municipal services must be treated equitably in the application of tariffs” whilst Art 74.2 d states that “tariffs must reflect the costs reasonably associated with the rendering of the service”. Additionally, water and electricity tariffs for Residential Houses were the same for business; the only difference would be that the business charges excluded the free 6kl of water allocation to residential properties.

A survey was conducted in April by STPP among small tourism businesses focusing on the needs of Smaller Accommodation Establishments regarding rates, zoning and service charges. The 1 500 surveys which were sent to Smaller Accommodation Establishments with 163 responses received displayed an interesting spread with no consistency. It seemed that various establishments sizes were zoned differently depending on the municipality but what was clear was that some smaller establishments were business zoned which should not have been required. It seemed that in many cases, business zoning had been done where it was not a requirement. Consent use seemed to be the norm in most cases, however in smaller establishments, this should not have been necessary. In many cases, business zoning had been done where it was not a requirement. In many cases, establishments had not been rezoned from residential where this was a requirement. With regards to water and electricity, while it seemed that there were a significant number of establishments that were residentially zoned but paying higher rates of business rates, the opposite was also prevalent with business zone properties paying incorrect taxes. Other concerns raised by STPP were reflected in the submission.

Discussion
The Chairperson wanted to know how Sustainable Tourism Partnership Programme was assisting Smaller Accommodation Establishments. What is the input of Sustainable Tourism Partnership Program in the Amendment Bill?

Ms Ungersbock replied that assistance was given to the Smaller Accommodation Establishments by organising workshops that would communicate to the Smaller Accommodation Establishments what is expected rules of the Municipalities in which they are situated. This is essential because we have noticed that the Municipalities have different benchmarks for charging rates. The input of Sustainable Tourism Partnership Programme would be to assist in giving a more uniform rate or benchmark in charging rates on Smaller Accommodation Establishments.